It's raining dots

Hi, we're your central bank
And have we got news for you
You better listen
Get ready, all you Fed funds shorts
And leave those sell tickets at home
Alright

The S&P's rising, but inflation's growth is slow
According to all sources
Real rates, they must stay low
'Cause today for the nth time
When some shorts were feeling hot
Just like every other SEP
It's gonna start raining dots

It's raining dots, hallelujah, it's raining dots, is my song
I'm gonna go out to run and let myself get
Absolutely stonking long
It's raining dots, hallelujah
It's raining dots, all throughout our plot
Sixteen, seventeen, later on
Even dots for the long run

God bless mother nature, she has made some easing free
Every time we drop the dots, it's really dead easy
Like clockwork every quarter, we rearrange our guess
So each voter can drop their call for rate hike progress
Oh it's raining dots, yeah
S&P keeps rising
PCE inflation's slow
According to all sources
R* is really low
Cause today for the nth time
When some shorts were feeling hot



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17 comments

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Widowmaker
admin
September 21, 2016 at 7:54 PM ×

This is gold

The fed is losing all credibility...

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Mr. T
admin
September 21, 2016 at 8:27 PM ×

I don't know how to reconcile Yellen saying policy is "moderately accommodating" and that there are "no signs of leverage building in the system". This feels like so much of politically charged policy debate in the US now, where no policy debate can even happen because noone can agree on the base facts. The lack of at least basic acknowledgment that zero rates for a decade may create problems is disconcerting.

The dots are low, and I dont buy any of this "neutral rate at zero" crap. Despite this, I simply cannot imagine a scenario where this fed ever gets over 1%.

The CB crap went about as expected here. Taking the opportunity to lighten up.

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12yo HFM
admin
September 21, 2016 at 8:37 PM ×

LB said '...we get to listen to 12yo doing what he does "best", i.e. baiting of his imaginary "perma-bears"...'

LOL. It kinda sucks for them that I'm so good tho right? Anyway long SP500 into FOMC was fun - let's do it again in Dec... Peace out.

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obelix
admin
September 21, 2016 at 8:47 PM ×

Adapted from The Pulp Fiction:

“GDX... Who’s ticker is this?”
“The Fed’s.”
“Who’s Fed?”
“Fed’s dead, baby... Fed’s dead.”

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12yo HFM
admin
September 21, 2016 at 8:52 PM ×

Nasdaq ATHs (no doubt the market 'rewarding' us for fleeing the volatility of fixed income and investing in safe biotech/tech stocks) #FTW

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obelix
admin
September 21, 2016 at 9:07 PM ×

A reporter to a regulator: "Why do you regulate banks?"
The regulator to the reporter: "Because that's where the money is."

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johno
admin
September 21, 2016 at 9:53 PM ×

Meanwhile, USDJPY is closing on its lows just above 100. Will watch the Japan open with interest ....

As an aside, I had to laugh when I saw GS's "Global markets daily: the BoJ doubles Down," where they pointed to the chart from Oct 31 2014 as suggestive of how price action would unfold. They used the same chart right after this year's January meeting ... and we know how that turned out ...

Between the BoJ saying it's happy with current flatness of the yield curve and today's price action, I'm guessing the sell-off in the 30y is over for now.

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Anonymous
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September 21, 2016 at 10:36 PM ×

Janet ain't gonna hike and is gone Dec if Trump gets in. She said "none of us want to be the one who raises rates and cause a recession"/sic.

Excuses upon excuses. They are creating the grounds for price action similar to Dec and Jan of last year.

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TraderJim
admin
September 21, 2016 at 10:38 PM ×

RBNZ released their statement today

http://www.rbnz.govt.nz/news/2016/09/official-cash-rate-unchanged-at-2-percent

"The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.0 percent
...
the high exchange rate continues to place pressure on the export and import-competing sectors and, together with low global inflation, is causing negative inflation in the tradables sector. A decline in the exchange rate is needed.
...
Monetary policy will continue to be accommodative. Our current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range. We will continue to watch closely the emerging economic data"

NZDAUS at .962 today off from .976 last week

Placing some shorts here, see what happens

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Anonymous
admin
September 21, 2016 at 10:56 PM ×

The dovish Fed ends today. For the next nine months, a hawkish Fed will take control.

And people do not realize it.

The economic reason is that inflation is already here and will only grow. What do you think how much the medical cost will rise when biggest insurance companies exit the state/federal exchanges? And there is the base effect of the oil price early next year. And there are the Hanjin shipping interruption and China PPI's rebound. So Fed should have a harder time to not hike in face of rising inflation.

More importantly, they need to hike in the next few months for political reasons. For one, they need to save face and make themselves look credible. For two, they need to create the environment for Hilary to do fiscal stimulus. If they hike several times before 7/2017, the new administration will not be blamed for the stock market crash/maybe mini recession. Then Hilary could use the crisis to force a big fiscal spending expansion: spread the money to those helping her get elected and buy votes for the reelection.

They are smart to know that it cannot go on like this for another 4 years. So they would rather have a crisis at the beginning of their first term than having one near the end, and take the credit for the subsequent recovery but not the blame for the crash.

This prediction may look like a conspiracy theory but it fits those policymakers' calculation perfectly.

Not only will they hike in Dec, they will hike aggressively in Jan/Feb, March, May, and June 2017. I would bet on at least two hikes for the first half of 2017.

They could still make noises about NOT hiking before election and big companies may even put out some rosy earnings/guidance in Oct. It should be a good time to load shorts and this one should be a big one: because everybody needs it.

Yellen needs it because she wants to show that she has some backbone. Hilary needs it because she needs a crisis to spend money/favor. Big money managers need it because they need to take profit before the tax increase and reload the stocks at much lower level.

Hope this makes sense.

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Anonymous
admin
September 21, 2016 at 11:51 PM ×

Anon 10:56

"Not only will they hike in Dec, they will hike aggressively in Jan/Feb, March, May, and June 2017. I would bet on at least two hikes for the first half of 2017."

If that is going to be the case, what will the long bond do from now until mid-2017?

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Anonymous
admin
September 22, 2016 at 12:10 AM ×

I have heard that quite a number of managers have already made their year, and are therefore abandoning the market until next year in order to avoid the probable election and December-FOMC angst/volatility spikes. Perhaps we indeed are looking at a 6-9 month decline in equities, with characteristic episodic rallies therein?

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Leftback
admin
September 22, 2016 at 12:39 AM ×

It would be wise to recall that domestic central banks are not the only factors that influence asset prices. Creeping inflation will likely have an influence on corporate profits in the US before long, as we all know that the US consumer is not spending, largely because he/she is experiencing a very different CPI than the one measured by Dame Janet and her fellow apparatchiks. [Stalinist analogies seem appropriate for the current age of deception].

The dynamics of other global bond markets (Europe, Japan, even China's massive debt bubble) may prove more important to US market behavior for the remainder of 2016 than any of the "forward guidance" uttered by the Yellen Fed. Market participants will have grown quite weary of parsing FOMC chatter at this point, and it's possible that Fedspeak will simply be ignored for now. One thing we should consider as a possibility is that the Fed sees an imminent resurgence of the European banking crisis and refrained from tightening in order to retain the potential for a minimal response to such an event.

The Clinton candidacy is clearly in deep trouble, by the way, [I am not political and am not expressing a preference here], not least because there is simply no coherent economic plan emanating from the Democratic candidate to benefit 99% of the US population. This is one of many reasons why she is rapidly losing support among groups that would normally be automatic Dem voters - young people, African Americans, even other immigrant groups see NOTHING constructive in her plans and will stay home in large numbers or even defect to other candidates. If this drift in the polls continues, there may be consequences for markets.

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Anonymous
admin
September 22, 2016 at 12:54 AM ×

@leftback,

Two points I want to make on your comments:

They will care much less about international markets after Nov. They may even welcome some crisis in EU, China or Russia for geo-political reasons, just like 97 East Asian crisis.

And I would not read too much into the current poll numbers: She is still ahead and has used the current numbers to scare voters already.

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Anonymous
admin
September 22, 2016 at 3:55 AM ×

Agree with anon 12:45. The news media wants it to appear like a close race. That keeps their ratings/viewship higher.

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Nico G
admin
September 22, 2016 at 4:50 AM ×

anon 10:56 this ain't conspiracy theory this is how the game is played

i was even suspecting the Fed to start their multi month hawkish campaign yesterday so that democrats would not be accused of working exclusivey for risk assets, come November but as other said more time might be needed by the big boys to sell to funny money and close shop for the year.

in that industry, you can't be paid huge fees to sit on cash too long can you? herdism better than any sense of precaution

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checkmate
admin
September 22, 2016 at 8:08 AM ×

Aon 3.55am
I no longer even know why I a surprised by people's faith in polls. FFS son just take a look at the UK to get some idea of how reliable these are (are not) !
I don't think it is that difficult to see why Trump right now as much more appeal than most of us would expect. Disaffected vote is what I would call it and it's big and it's growing.

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